The Ultimate Guide to Investing in Web3 in 2024: New Opportunities, Strategies, and 10 Top Blockchain Projects to Watch
Web3 and blockchain technology exploded in popularity in 2022, attracting significant attention and investment. As we head into 2024, Web3 is poised to continue disrupting industries and transforming how we interact online. This comprehensive guide explores the top Web3 projects to watch, emerging crypto trends, advice for investing in blockchain in 2024, and answers to frequently asked questions about the future of the decentralized web.
Introduction
Web3 represents the next evolution of the internet – a decentralized web built on blockchain technology that grants users more control over their data and assets. In 2022, we saw an influx of investment and interest in Web3 as major companies like Meta and Microsoft announced plans to integrate blockchain and crypto.
But Web3 is still in its early stages, offering tremendous opportunities for investors who want exposure to this transformative technology. As we look ahead to 2024, here are some of the key trends in Web3 to pay attention to:
- Continued growth of NFTs and the metaverse – Non-fungible tokens and virtual worlds represent some of the most hyped aspects of Web3. Expect the metaverse landscape to expand and NFT utility and adoption to increase.
- New blockchain platforms – Ethereum dominated Web3 development in 2022, but new smart contract platforms like Solana, Polkadot, and Cardano are vying to challenge Ethereum’s supremacy due to its congestion and high gas fees.
- Crypto regulation takes shape – With crypto gaining mainstream traction, regulation will be a defining issue. How policymakers decide to oversee the industry could significantly impact investment.
- Enterprise blockchain adoption – Corporations from finance to healthcare are exploring blockchain integration. As real-world utility increases, investment opportunities abound.
This guide examines the top Web3 projects to consider investing in for 2024. We’ll overview emerging trends, undervalued crypto sectors, and discussion strategies for building a Web3 investment portfolio. Let’s dive in!
Top Web3 Projects to Watch in 2024
Ethereum
As the first blockchain to enable smart contract functionality, Ethereum has firmly established itself as the go-to platform for developers building Web3 projects. In 2024, Ethereum is set to complete its long-awaited transition to a proof-of-stake consensus model through a series of upgrades collectively known as ETH 2.0.
This shift will make Ethereum more scalable, secure, and sustainable. It also introduces potential for Ethereum staking, allowing investors to earn rewards for holding ETH. As the foundational blockchain for Web3, Ethereum should continue appreciating in value and cementing its position as the #1 smart contract platform.
Polygon
Polygon (previously Matic Network) emerged as one of the leading layer 2 solutions designed to help scale Ethereum. Polygon utilizes a Proof-of-Stake sidechain that offers faster and cheaper transactions while still benefitting from Ethereum’s security.
As gas fees continue hindering Ethereum’s growth, projects and investors are turning to layer 2 solutions like Polygon to enable fast, low-cost transactions ideal for NFTs, DeFi, gaming, and the metaverse. With strong developer support and adoption surging in 2022, Polygon’s native token MATIC looks undervalued.
Solana
Billed as the “Ethereum killer”, Solana is a highly scalable alternative smart contract platform that uses a unique proof-of-history consensus built on SHA256 verifiable delay functions. Solana boasts transaction speeds of over 50,000 TPS and low fees of $0.00025 per transaction.
As developers deal with Ethereum’s limitations, they are increasingly deploying dApps on Solana. With 500 projects spanning DeFi, NFTs, and Web3 infastructure, Solana has strong fundamentals that could enable its SOL token to challenge ETH’s dominance in 2024.
Cardano
The brainchild of Ethereum co-founder Charles Hoskinson, Cardano differentiates itself with its evidence-based approach and peer-reviewed open-source smart contracts. After years of meticulous research and development, Cardano launched smart contract functionality in 2021 via its Alonzo hard fork.
More upgrades are slated for 2023 and 2024 to optimize scalability and interoperability. With a strong treasury and devoted community, Cardano aims to be a sustainable, long-term blockchain ecosystem. Its native ADA token could see major gains as development progresses.
Aave
Aave is a leading decentralized finance (DeFi) lending protocol that allows users to earn interest by lending and borrowing crypto assets without an intermediary. One of the first DeFi apps on Ethereum, Aave offers flash loans and uncollateralized loans using “on-chain credit checks”.
With $20+ billion in total value locked, Aave is widely used by DeFi investors seeking to maximize yields on their portfolio. As the DeFi market expands in 2024, the demand for decentralized lending platforms like Aave will increase. AAVE governance tokens grant holders decision-making power and incentives like discounted fees.
Chainlink
In order for smart contracts to interact with real-world data, they require oracle networks like Chainlink to provide reliable off-chain information. Chainlink has become the go-to oracle solution with extensive integration across blockchains and partnerships with major legacy firms.
With staking and CCIP Read coming in 2023, Chainlink is positioned to grow its oracle dominance as Web3 adapts more real-world use cases. The LINK token powers the network and has significant upside potential as data inputs become increasingly critical on-chain.
The Sandbox
The Sandbox is one of the most popular blockchain-based virtual worlds where users can create voxel-style metaverse experiences. Players can buy virtual land NFTs, create avatars, build games, and monetize their creations.
With strong investor interest and partnerships with brands like Gucci and Warner Music Group, The Sandbox will be a leading metaverse project as virtual worlds and NFT gaming gains momentum. The SAND utility token allows holders to participate in governance and will be crucial for transacting within The Sandbox.
Decentraland
Similar to The Sandbox, Decentraland is a 3D virtual reality platform powered by the Ethereum blockchain. Users can purchase land parcels as NFTs, explore the world, interact with games and content, and leverage in-world builders to create custom scenes.
With virtual real estate selling for millions, Decentraland attracts significant investor dollars. As brands and creators continue embracing the metaverse, Decentraland’s MANA token offers exposure to this growing landscape. The team plans additional features and live events which could boost Decentraland’s value.
Filecoin
Filecoin is a decentralized storage network that allows users to earn tokens by renting out their excess storage space. Leveraging blockchain incentives, Filecoin aims to build a distributed, efficient marketplace for storing and retrieving files and data.
As Web3 expands, storage solutions like Filecoin will be critical infrastructure. With recent upgrades like Slingshot and Gemini completed, Filecoin looks poised for wider enterprise and developer adoption. The FIL token serves as the incentive and payment mechanism underpinning Filecoin’s networks.
Livepeer
Livepeer powers decentralized video transcoding and streaming for broadcasters and builders. Using a network of “orchestrators”, Livepeer allows users to share video and scale broadcasting in a Web3 context.
As video becomes an increasingly critical component of social platforms, metaverses, NFT galleries, and more, decentralized solutions like Livepeer that reduce costs and censorship risks are key infrastructure pieces. The LPT token aligns incentives between orchestrators and broadcasters.
Axie Infinity
One of the first blockchain games to see huge adoption was Axie Infinity – a Pokemon-style universe where players breed, battle, and trade Axies (creatures). Axie’s planned launch of its Origin platform makes AXS a leading contender to catalyze blockchain gaming.
Play-to-earn models are integral to blockchain gaming adoption. As developers build more sophisticated metaverse games, platforms like Axie Infinity stand to benefit significantly. The AXS token and Smooth Love Potion (SLPs) have strong utility value in Axie gameplay and governance.
This covers some of the top Web3 projects to watch closely heading into 2024. But this technology moves quickly, so tracking emerging opportunities is key.
Key Crypto Sectors to Watch in 2024
Beyond the major protocols, diving into key crypto sectors provides exposure to where significant innovation is happening in Web3:
NFTs
Non-fungible tokens upended digital ownership and fueled the social token economy in 2022. While the market cooled from its previous frenzy, NFTs still present tremendous investment potential as their utility evolves.
Key areas to watch include profile pic projects like Chromie Squiggles, continued growth of bluechip collectibles like CryptoPunks, and gaming NFTs like Axie Infinity providing true ownership of in-game assets. Mainstream brands launching NFTs will further entrench this technology culturally.
Metaverse
Virtual worlds are expanding rapidly as users now expect persistent, interactive shared experiences online. The metaverse encompasses everything from gaming platforms to augmented reality to persistent social spaces.
Top metaverse projects like Decentraland and The Sandbox are paving the way, but traditional tech giants like Meta are pouring billions into this area. The coming years will see the metaverse landscape take shape through consolidation, specialization, improved interfaces, and new economic models.
DeFi
Decentralized finance is recreating traditional financial products like lending, trading, derivatives, and more in a permissionless, trustless manner on blockchain. Developers are improving upon DeFi’s UX and security after significant hacks in 2022.
As regulation provides more legal clarity, institutions are likely to embrace DeFi for cost reduction, transparency, and improved access. Stablecoins, DEXs, yield farming, and insurance protocols lead the growing DeFi space heading into 2024.
Gaming
Play-to-earn blockchain gaming gained steam in 2022, but mainstream game studios are still hesitant to fully embrace Web3. Expect more hybrid approaches combining NFTs and traditional gameplay in 2023.
True triple-A blockchain games will take time to develop. But once technology like real-time portals and seamless world-building matures, the P2E model has huge potential to transform gaming business models and reward players directly.
DAOs
After the success of ConstitutionDAO, decentralized autonomous organizations (DAOs) emerged as the ultimate representation of Web3’s possibilities. DAOs allow coordinated group action and funding for causes and communities with transparent processes.
Social tokens are an impactful model that emerged in 2022, allowing creators to launch personalized tokens that their supporters and fans can own to get access benefits. In 2024, look for DAO adoption to increase across philanthropy, politics, fandoms, investing, non-profits, and more.
Web3 Infrastructure
While “blockchain” often refers specifically to Layer 1 platforms like Ethereum and Solana, there is a whole stack of infrastructure needed for the decentralized web to reach its potential.
This includes essentials like oracle networks (Chainlink), data availability (The Graph), storage (Filecoin), identity (Ceramic Network), payments (Flexa), scaling (Starkware), and more. As developers build, these picks-and-shovels protocols support Web3 innovation.
How to Invest in Web3 for 2024
With an understanding of the top projects and sectors to watch, let’s discuss strategies for investing in Web3 in the near-term:
Pick Your Blockchain(s)
While many protocols are multi-chain, it still helps to align with one or more specific blockchain ecosystems like Ethereum, Solana, Cardano etc. This allows you to track developments on those platforms closely and identify promising new projects launching there.
Ethereum remains the center of gravity given its developer community and security. But its limitations have spurred the rise of “ETH killers” that could diversify your portfolio with more scalable alternatives.
Maintain a Core/Satellite Split
A portfolio typically has core long-term holdings and satellite positions with more risk/reward potential. In crypto, BTC and ETH generally serve as core large cap assets, while smaller altcoins and tokens represent satellites.
This enables upside exposure while minimizing volatility and drawdown risks. For 2024, a mix of leading DeFi tokens, metaverse coins, and base layer platform assets makes sense as a core foundation. Stay active trading satellites.
Use Dollar-Cost Averaging
Dollar-cost averaging means steadily investing fixed amounts over time regardless of price. Instead of trying to time markets, DCA reduces risk through consistency.
For crypto’s volatility, DCA helps build positions – for instance, buying $100 of bitcoin each week. DCA takes the emotion out of investing and leads to solid average costs basis.
Stake and Earn Yields
Many major crypto assets can now be staked to support network security in exchange for rewards. Staking allows your portfolio to earn yields between 5-15% APY through participation and delegation.
Assets like ETH, SOL, DOT, ADA, ATOM and more offer easy staking options. As Eth2 progresses, ETH staking yields are projected to rise to 20% APY, offering an attractive passive income stream.
Assess Risk Ratios
The risk/reward ratio helps evaluate emerging opportunities against established projects. Divide potential upside by downside risk – higher ratios signal a more favorable risk profile.
For example, a new DeFi token with 3x upside potential and a 1x downside risk has a better risk ratio (3.0) than Ethereum with 2x upside but 0.5x downside, giving a 4:1 ratio. Scan for promising risk ratios.
Maintain Liquidity
Investing solely in illiquid tokens can make managing your portfolio tricky. Ensure you have sufficient exposure to liquid large cap assets like BTC, ETH, stablecoins that make trading, staking, and rebalancing smooth.
Too much liquidity also has risks – a prudent ratio is ideal. Decentralized exchanges are improving token liquidity and slippage management through innovations like automated market makers.
Run Test Transactions
With the complexity of Web3 services, always run small test transactions before committing major funds to new protocols. Confirm you fully understand factors like fees, required network settings, staking mechanisms, and withdrawal flows.
Test transfers also verify assets are sent as intended. As DeFi and dApps expand, exploiting system risks gets easier – diligence is key. Bookmark services after testing to build your trusted Web3 toolbox.
Get Active in Communities
Gaining an information edge in Web3 requires participating in Discord servers, forums, social channels, and more to gauge sentiment and discussions. Follow thought leaders, builders, and founders to analyze what they prioritize and share.
But remember cryptosphere hype isn’t everything – temper signals with your own measured analysis. Stay critical of “influencers” with unknown credentials or financial ties.
Keep Tabs on Funding
Venture funding shows which sectors of Web3 are attracting investment dollars and which projects investors deem most promising.
Monitor latest funding rounds, volume trends over time, and backers like a16z Crypto for data points on capital inflows that could signal rising adoption and impact on token prices.
Plan Around Upgrades
Blockchain networks are constantly evolving via planned upgrades, hard forks, mergers, token migrations etc. Keep updated on coming development releases and changeover deadlines to avoid disruptions.
For example, tracking Ethereum’s merge transition to PoS will enable you to manage protocols and assets accordingly. Upgrade events can create temporary price volatility to capitalize on.
Balance Hype vs. Substance
The Web3 space is rife with influencers and communities that stoke hype around coins. But not every flashy launch gains real user traction and delivers tangible utility.
Analyze the strength of token distribution, mechanics, roadmaps, community engagement, and demonstrated adoption to gauge if hype has substance. Fundamentals > FOMO.
Key Questions About Investing in Web3
What are smart contracts and why do they matter?
Smart contracts are self-executing programs on blockchains like Ethereum that run exactly as programmed without downtime. This enables decentralized applications like DeFi, NFTs, games and more. The potential to reduce intermediaries and costs makes smart contract adoption a key Web3 driver.
How will regulation impact crypto investing?
More crypto regulation is widely expected, but the specifics remain uncertain. Stricter rules on stablecoins, taxation, disclosures, and Know Your Customer (KYC) policies could emerge. But banning crypto broadly seems unlikely. Constructive regulation that provides clarity while still allowing innovation is ideal for investment growth.
How can I research new blockchain projects?
Quality crypto research examines factors like tokenomics, vesting schedules, decentralization, team backgrounds, roadmap realism, venture funding, Github audits, community vibes, social engagement, media coverage, exchange listings, on-chain metrics like TVL, and project originality.
What are the risks of DeFi?
Decentralized finance introduces risks including smart contract bugs, price volatility from algorithmic asset management, and lack of investor protections. But diligence on code audits, convergence trends, stability mechanisms, and insurance protocols can mitigate risks. DeFi presents transformative upside if utilized responsibly.
How are institutional investors getting involved?
Institutions are launching crypto funds, adding BTC to corporate treasuries, integrating blockchain for business operations, and exploring early stage protocol investing. Validating custody solutions like Anchorage and core blockchain infrastructure benefits institutions and broader adoption overall.
What are the advantages of NFT ownership?
NFTs provide verifiable digital ownership, scarcity, transferability, and transparency unavailable with traditional assets. Rights like commercialization can be programmatically baked into NFTs. They allow fuller access and economic participation in Web3 networks and communities.
Should I be concerned about quantum computing?
Future advanced quantum computers could theoretically compromise cryptography and blockchain security, including exploiting Bitcoin’s SHA256 algorithm. But quantum-resistant algorithms and encryption are being developed including hash-based sigantures. Overall the threat horizon likely remains decades away.
How can Web3 improve internet privacy and security?
By decentralizing control
Leveraging Web3 to Enhance Privacy and Security
One of the promises of Web3 is enhancing privacy and security compared to the current centralized internet. Here are some of the key ways blockchain technology can improve privacy and protect user data:
Decentralized Identity Management
Rather than identities being stored on centralized servers like those operated by Facebook or Google, Web3 uses decentralized identifiers (DIDs). These are owned and controlled fully by users via private keys, allowing for pseudonymous interactions online.
DIDs prevent a single entity from profiling users and exploiting their data. Self-sovereign identity puts users back in charge of what personal data gets shared.
Encrypted Data Transmission
Blockchains utilize cryptographic principles to encrypt all transactions and data processing on the network. This prevents surveillance, tampering, and censorship of communications.
Encrypted messaging apps like Signal demonstrate the power of private peer-to-peer data transmission. Applying similar principles in a Web3 context secures online activity against interference.
User-Governed Data Sharing
Current platforms monetize user data through ad targeting and revenue sharing without transparency or consent. Web3 protocols can encode data usage policies on-chain that users control via private keys and governance voting.
This gives users visibility and participation in how their data generates value. Users may opt-in to sharing data for incentives like rewards or reputation tokens that benefit them directly.
Trustless Interactions
Web2 requires trusting centralized intermediaries like banks, social networks, and e-commerce platforms to facilitate transactions and interactions. Their interests don’t always align with users.
Web3 replaces middlemen with code, enabling trustless direct transactions through smart contracts, DAOs, decentralized storage/hosting, and crypto payments. This reduces exploitation, censorship, and exclusion.
Transparent Reputation Systems
Reviews, ratings, and reputation systems on current platforms can be manipulated by service providers and participants. Web3 enables transparent on-chain reputation reflected through token ownership and blockchain activity.
Bad actors can’t hide past behavior or easily spoof identities. Shared ledgers build accountable reputation for commerce, social engagements, credibility, and community roles.
Security Through Consensus
Centralized servers present single points of failure. If hacked, vast amounts of data is compromised. But distributed blockchain networks use consensus mechanisms like proof-of-work for resilient security.
Successfully attacking decentralized networks requires overtaking the majority of nodes – a vastly greater challenge. The more distributed the network, the stronger its security posture through consensus.
Web3 presents opportunities to rectify many of the vulnerabilities and trust issues that plague the current internet. But thoughtfully building this new paradigm focused on empowering users will determine whether its promises of users-first data sovereignty, security, and privacy ultimately come to fruition.
Conclusion and Key Takeaways
As Web3 technology matures and sees increasing real-world adoption, more investors are looking to add crypto exposure. While risks certainly exist in this nascent landscape, tremendous opportunities await in backing the protocols poised to drive blockchain’s exponential growth.
Here are some key takeaways for investing in Web3 in 2024:
- Web3 sectors like DeFi, NFTs, gaming, DAOs, and the metaverse show particular promise as blockchain use cases expand. Maintain diversity across assets.
- Manage volatility through prudent portfolio construction, staking yields, and dollar cost averaging into solid positions.
- Monitor launchpads and communities to identify emerging protocols with positive traction and risk/reward ratios.
- Mastering Web3 technologies takes time. Theory and fundamentals matter over hype. Stay skeptical and do your own research.
- Regulation will shape the trajectory of blockchain technology and crypto. Constructive policy and legal frameworks will ultimately benefit the industry.
The decentralized web’s formative stage offers perhaps a once-in-a-generation opportunity to support and grow alongside the stacks, protocols, apps, and networks that will populate Web3. While risks exist, the transparency, programmability, and access of blockchain technology provides a chance to rectify the centralization pitfalls that plague today’s internet. Keep an open mind, but think critically. And as you explore this new frontier, always invest based on a prudent risk management strategy aligned with your individual goals and vision for the future.